Ryder Truck Rental, Inc. v. Schapiro & Whitehouse, Inc.

• Citation: 269 A.2d 826,259 Md. 354
• Decision Date: 21 October 1970
• Docket Number: No. 64,64
• Parties: RYDER TRUCK RENTAL, INC. et al. v. SCHAPIRO & WHITEHOUSE, INC., to its own use and to the use of Aetna Casualty& Surety Company.
• Court: Court of Appeals of Maryland

Page 354

259 Md. 354

269 A.2d 826

RYDER TRUCK RENTAL, INC. et al.

v.

SCHAPIRO & WHITEHOUSE, INC., to its own use and to the use

of Aetna Casualty& Surety Company.

No. 64.

Court of Appeals of Maryland.

Oct. 21, 1970.

Thomas G. Andrew, Baltimore (Rollins, Smalkin, Weston & Andrew, Baltimore, on the brief) for appellants.

H. Thomas Howell and David M. Buffington, Baltimore (Semmes, Bowen & Semmes, Baltimore, on the brief) for appellee.

Argued before HAMMOND, C. J., and BARNES, McWILLIAMS, SINGLEY and SMITH, JJ.

McWILLIAMS, Judge.

The facts of this case are simple enough but they are extraordinary in that they are apt never to recur in quite the same configuration. They have brought into conflict the virtually identical 'other insurance' clauses of two automobile liability insurance policies. The generally accepted notion that this is a somewhat untidy area of the law has been succinctly articulated in 38 Minn.L.Rev. 838, 841 (1954):

'Despite efforts by insurance counsel to draft explicit and litigation-proof terms in liability policies, especially in the 'other insurance' area, litigation is all too frequently necessary to determine to what extent, if at all, each insurer must contribute in a double coverage case. The cause of litigation is not so often the ambiguity of the drafted policy in reference to the existence of other insurance as the conflicting clauses of the two applicable policies. Judicial interpretation of the conflicting clauses has not been uniform enough as yet to allow safe prediction of a certain result. Not only have interpretations of the 'other insurance' clauses not been standard, but also the courts are not in agreement as to whether the 'other insurance' clauses ought to be the only controlling factors involved.

'The main approaches used by the courts to resolve the problem of the conflicting 'other insurance' clauses are four in number. They include: (1) holding the more specific insurer liable to the exclusion of the more general insurer; (2) holding the insurer of the primary tortfeasor primarily liable; (3) applying the 'other insurance' clause contained in that policy issued subsequent to the other policy; and (4) interpreting the clauses of the respective policies.'

We shall approach the resolution of the problem now before us by undertaking to interpret the language of the two policies. Such an approach seems to be required by our holding in Consolidated Mutual Ins. Co. v. Bankers Insurance Co. of Pennsylvania, 244 Md. 392, 223 A.2d 594 (1966). In that case Judge Barnes, for the Court, said:

'In cases where two or more of the 'other insurance' clauses conflict, most courts resolve the problem of double coverage by attempting to reconcile conflicting clauses. This Court has followed this approach. Celina Mutual Casualty Co. v. Citizens Casualty Co., 194 Md. 236, 71 A.2d 20, 21 A.L.R.2d 605 (1949); Citizens Casualty Co. of New York v. Allied Mutual Ins. Co., 217 Md. 494, 144 A.2d 73 (1958); Zurich Insurance Co. v. Continental Casualty Co., 239 Md. 421, 212 A.2d 96 (1964). This approach recognizes that the rights and liabilities of the different insurers involved should depend, as far as possible, upon the specific language of the policies. The relative liabilities of the insurers are contingent, in each case, upon the characterization of the 'other insurance' provisions as escape clauses, excess clauses or pro-rata clauses.' Id. at 396, 223 A.2d at 596.

As we entered the 'Soaring Sixties' Schapiro and Whitehouse, Inc. (Schapiro), owned three open flatbed trailers, two tractors, and one 'regular heavy duty truck' all of which were used exclusively in the conduct of its rag business. The vehicles were insured by a policy issued by Aetna Casualty & Surety Company (Aetna) which provided, among other things, as follows:

'I. COVERAGE A-BODILY INJURY LIABILITY-AUTOMOBILE:

To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, caused by accident and arising out of the ownership, maintenance or use of any automobile.

'COVERAGE B-PROPERTY DAMAGE LIABILITY-AUTOMOBILE:

To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of injury to or destruction of property, including the loss of use thereof, caused by accident and arising out of the ownership, maintenance or use of any automobile.'

'The unqualified word 'Insured' includes the named Insured and also includes (1) * * * and (2) under Coverages A and B, any person while using an owned automobile or a hired automobile and any person or organization legally responsible for the use thereof, provided the actual use of the automobile is by the named Insured or with his permission, * * *. The insurance with respect to any person or organization other than the named Insured does not apply under division (2) of this insuring agreement:

(a) with respect to an automobile while used with any trailer owned or hired by the Insured and not covered by like insurance in the Company; or with respect to a trailer while used with any automobile owned or hired by the Insured and not covered by like insurance in the Company;

(d) with respect to any hired automobile, to the owner, or a lessee thereof other than the named Insured, or to any agent or employee of such owner or lessee;'

Having decided in 1961 that it was better to rent tractors than to own them, Schapiro sold the two tractors and the truck. In April of that year it rented a tractor from Ryder Truck Rental, Inc. (Ryder). Ryder agreed to 'supply $100,000 property damage, $250,000/$500,000 public liability, fire, theft, comprehensive, and $100 deductible collision insurance.' Compliance with its obligation in this regard was accomplished by a comprehensive liability policy issued by Liberty Mutual Insurance Company (Liberty), the pertinent provisions of which were as follows:

'It is agreed that such insurance as is afforded by the policy for bodily injury liability under Coverage A and for property damage liability under Coverage B applies to any one or more persons or organizations, leasing an automobile from any named insured listed in the schedule below, subject to the following provisions:

4. The insurance afforded to such lessee applies only to the maintenance or use of (1) the automobile so leased and (2) trailers owned by the lessee or for which he is legally liable, but only while any such trailer is attached to the leased automobile referred to in part (1) of this subparagraph.

5. If the subject of any such leasing agreement is a trailer, no insurance is afforded any lessee while such trailer remains attached to any automobile for which there is no insurance under this endorsement.'

Both Aetna's policy and Liberty's policy contained the following provisions:

'(b) Automobile. Except where stated to the contrary, the word 'automobile' means a land motor vehicle or trailer as follows:

(1) Owned Automobile-an automobile owned by the named Insured;

(2) Hired Automobile-an automobile used under contract in behalf of, or loaned to, the named Insured provided such automobile is not owned by or registered in the name of (a) the named Insured or (b) an executive officer thereof or (c) an employee or agent of the named Insured who is granted an operating allowance of any sort for the use of such automobile;

(3) Non-Owned Automobile-any other automobile.'

'Other Insurance-If the Insured has other insurance against a loss covered by this policy the Company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declaration bears to the total applicable limit of liability of all valid and collectible insurance against such loss; provided, however, the insurance under this policy with respect to loss arising out of the maintenance or use of any hired automobile insured on a 'cost of hire' basis or the use of any non-owned automobile shall be excess insurance over any other valid and collectible insurance.'

On 11 May 1961 Wilbert Lee Cameron (Cameron), an employee of Schapiro, was driving the Ryder tractor, to which was attached one of Schapiro's trailers, north on the Reisterstown Road, in Baltimore County. Near Mount Wilson Lane the tractor-trailer combination collided with a Baltimore Transit Company bus. Several passengers, including Hazel Boulware, were injured and, of course, the bus was damaged.

Ryder and Liberty refused to protect and defend Schapiro and Cameron from the numerous claims filed against them. Aetna thereupon undertook to settle and did settle all of the claims except that of Hazel Boulware who thereafter filed suit in the Circuit Court for Baltimore County. The trial of her case in the fall of 1963 resulted in a judgment of $10,610 against Schapiro alone and judgments in favor of Ryder and Cameron for costs. Aetna expended $27,576.13, including the payment of the Boulware judgment, in settling all of the claims arising out of the collision. It is agreed that this amount, which also includes counsel fees, is fair and reasonable. It appears to be conceded, also, that the proximate cause of the accident was Schapiro's negligence in the maintenance of the brakes on its trailer and that both Ryder and Cameron were free of any negligence.

In May 1964 Aetna sued Liberty to recover the $27,576.13. Schapiro is a nominal plaintiff; Ryder is a nominal defendant. For reasons unknown to us the case was not tried until September 1969. In a long and comprehensive opinion the trial judge, O'Donnell, J., concluded that Liberty must pay Aetna $27,576.13. Judgment in that amount was made absolute on 10 February 1970. Liberty's appeal to this Court was timely.

The parties concede, as Judge O'Donnell found, that Schapiro was covered by Aetna's policy even though its trailer was...